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European Commission sees economic growth staying strong

Cyprus’ economic growth is expected to remain strong, driven by domestic demand, but downside risks are on the rise, according to the European Commission’s Spring Economic Forecasts, which were released on Tuesday.

According to the forecast for the Cypriot economy, GDP will continue to grow at 3.9 per cent in 2018, 3.1 per cent in 2019, and 2.7 per cent in 2020. Unemployment will drop from 8.4 per cent last year to 6.7 per cent in 2019 and 5.9 per cent in 2020.

The Commission warned against negative risks to the financial perspectives related to “uncertainties about the macroeconomic outlook, the effects of court decisions on past measures on public sector wages, and the potential shortage of public healthcare providers first years of the national health insurance scheme”.

Cyprus’ economic expansion is set to remain robust, driven by domestic demand, but risks are tilted to the downside.

Inflation is forecast to remain subdued. The budget is expected to return to surplus and public debt to steadily decline from 2019 onwards. Risks to the fiscal outlook are also mainly on the downside.
Investment is forecast to be robust, growing more strongly than the overall economic activity. An important part of investment comes from ongoing tourism-related projects. Other investment projects relate to residential construction, with half of all transactions in the sector driven by foreign demand, which in turn is supported by the Citizenship by Investment programme.

A large share of investment in Cyprus is associated with ship registrations. These are inherently volatile but more likely to increase following efforts to strengthen the shipping sector in the country.

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